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17. The Mexican economy barely grew at all during the Global War, and its overall performance between 1953 and 1971 was, at best, middling. It did, however, succeed in maintaining its relative position with the CNA, but a lot of that growth consisted of a mass movement of rural peasants to urban factories. It was lubricated by Mercator's almost-obssessive concern with budget surplusses, the huge expansion of higher education, and FANTL Mexico's traditionally-high savings rates. Mexico ran up a huge debt in the early years of the nationalization program, added to its Global War debt, but since then its debt-to-GDP ratio has fallen dramatically although it is still uncomfortably high. What held growth back was uncertainty about Mercator's intentions. The courts were some check on executive arbitrariness, but no substitute for a fully-functioning constitutional government. So while the German Empire and Japan made striking leaps towards closing their gaps with the CNA during the postwar decades, Mexico barely held its own, and by some measures its relative standing declined. The only rich country to do worse was Britain. Mexico did, however, grow substantially, and it is still among the richest economies in the FANTL. Oddly enough, Mexico benefitted from the Mason Doctrine. The CNA, for example, would lend pounds to the German Empire. The Germans would then use those pounds to import Mexican manufactures, which were cheaper and faced lower Zollverein tariffs than their North American equivalents. (Mexican food and raw materials exports were also important for Germany, although less so by the mid-1960s.) The Mexicans then used the revenues to buy advanced North American capital goods. In short, much of Mexico's export boom in the 1950s was indirectly driven by Mason Doctrine aid. The most damaging Mercator policy was the tax law. 95 (even 100!) percent brackets kicked-in at very low income levels, and despite the loopholes riddling the law most businessmen were forced to break it. Tax evasion was, in fact, one of the charges aimed at Robert Contreras. Contreras himself was, however, aquitted of most (but not all) of the counts: the courts had held in other cases that the intent of the law was not to force businesses into bankruptcy, which effectively legalized various types of tax evasion. Unfortunately, since businessmen neither knew Mercator's intent nor could predict future changes in the law, the uncertainty held back investment and growth. The tax law did, however, have one unexpected positive effect: a wide array of credits and deductions for investment boosted Mexico's already high savings and investment rates. The nationalizations, except for Kramer and other "enemy-owned" properties, were quite voluntary, and even the "enemy" nationalizations were compensated. Sobel called the federal bonds issued to pay for the companies "questionable," but the government maintained payments on all its issues, which paid the same coupon as the country's other outstanding debts. Mercator nationalized properties for security reasons, not a desire to establish socialism. Unfortunately, the program was designed badly, and allowed many entrepreneurs to sell losing operations to the government at inflated prices. These state-owned firms provided ample opportunities for corruption and are not particularly efficient. Jefferson Motors, for example, is a highly-subsidized mess rapidly losing ground to newer domestic competitors. The state-owned steel industry is a total loss. At the end of the day, Mexico's economic performance between the 1953 recession (mentioned in Sobel) and the 1971 recession resembled a cross between IOW Britain, France, and Japan circa 1970. Growth rates resembled IOW Britain. Living standards were, by 1970, roughly par with IOW France. (Car ownership, however, was much more widespread, so the southern USA might be a better example.) The economy's corporate structure resembles IOW Japan, based on exports of resource-intensive manufactured goods, with the following MAJOR caveats: the domestic service sector is more efficient than Japan's, the state-owned sector has no Japanese parallel (more resembling France or Italy), and both mining and agriculture are very important export sectors. The best (although still bad) overall IOW parallel is France. Mexico rapidly emerged from the 1971 recession, and has been growing at a blistering pace since. The export boom is, however, producing a political backlash in both the CNA and the German Empire, although neither country has yet raised trade barriers against Mexican goods. One reason for Moctezuma's good behavior internationally is that he strongly wants a free-trade agreement with the CNA. The only industries strongly opposed to the idea are steel and some (but not most) agricultural sectors like corn. Given the powers of the Mexican presidency, Moctezuma's popularity, Mexico's export strength, and the President's skillful use of protectionism aimed at poorer countries to buy support, the barriers to such an agreement all lie in Burgoyne. The Liberal victory in 1974 appears to have made the Continental Open Borders Agreement (COBA, or ACFA) less likely, but maybe only Nixon can go to China? (Return to You Can't Go Home Again.) Category:For All Nails footnote